Oil Trading Platform: How to Choose the Right Platform for Trading Oil

Commodities are basic goods traded in large quantities. They can be divided into four major categories: metals (such as aluminium, copper, gold, lead, nickel, silver, and zinc), energy (natural gas, coal, and petroleum), agricultural products (olive oil, cocoa, coffee, and sugar), and livestock and meat. Depending on the commodity and the trader, commodities can be traded on the spot or as futures. 

Commodities are thus very important for investors and traders looking to get into other markets and diversify their portfolios. Another reason for increased interest in commodity trading is the fact that the prices of commodities tend to move in the opposite direction of the stocks. So, investors look for commodity returns when the stock market is highly volatile. Additionally, commodities’ price movements depend on many factors and are prone to price fluctuations, making them perfect for speculative trading via CFDs. The goal of speculative trading using commodities is to make a profit from market volatility by accurately speculating the price change. This can only be done when the trader has all the necessary information about the commodity.

One of the most important commodities in the world today is oil. Oil or petroleum is a naturally occurring substance that runs our industries, motor vehicles, and many more man-made inventions. Oil trading involves buying and selling oil and its derivative products from oil companies worldwide. As you must know, oil is not found in every part of the world, so world governments rely on these sources and the owners of these sources to keep their countries running. This is why it is a heavily traded commodity, but unlike other commodities, it is not feasible to physically buy, store, and sell oil. This is where CFD trading comes in. 

Using CFD trading, traders can enter the world of oil trading and expand their portfolios without owning the commodity. Traders conduct oil trades through online platforms of their choice. Several trading platforms are available online, and all offer unique features. A trader must select the trading platform with utmost consideration, as the smooth execution depends on it. There are quite a number of factors to consider before choosing a trading platform, such as offered asset classes, platform fees and charges, risk management tools, and more. 

CFD trading via any platform works best for an experienced trader with expertise in trading and also deep information about oil trading and the factors that affect it. As a beginner trader, we suggest you build your CFD and oil trading knowledge and practice on a demo account before jumping to the real deal. This will not only help you build confidence in the matter but also help you manage your finances closely. To help you get started on the journey, in this article, we will take you through everything that you need to know about oil trading, how to choose an oil trading platform and much more. 

What Is an Oil Trading Platform?

An oil trading platform is an online platform where traders place orders to buy or sell oil. Traders begin by making an account and entering their details. Their accounts are then verified through email or identity verification. Next, traders choose the asset class that they want to trade, which in this case is oil. They place their orders, add tinkering like stop-loss orders, take profit orders, and hit execute. Through these platforms, they can place their trades, monitor them, build a trading portfolio, and visualise the price movements in real time. Thus, a trading platform is important to the trader’s arsenal. 

These platforms are not only specific to trading oil but can be used to trade any asset class as long as it is offered in the platform. Today, hundreds of online trading platforms; some are masterpieces, and some are scams. It is up to the trader to choose which platform he chooses and deposit funds in. There are quite a few ways to judge the authenticity and performance of a trading platform, and this is what we will discuss in the next part of the article. 

Key Features to Look for in a Platform

To execute seamless trading orders, traders need a great working trading platform. Find such a platform, traders can use the following key features:

Real-time Pricing

Real-time pricing is a must to make quick changes to your trades. Look for a platform that offers real-time price movements and insights into the market. This will not only help you monitor your trade in real time but will also help you adjust your trades as time progresses. Most trading platforms offer this feature as one of the most required features; however, before you invest your time, personal details, and possibly capital into a platform, make sure it offers real-time pricing updates from a credible source. 

Charting Tools

Charting tools are technical tools used extensively to analyse data from all possible angles and factors. These tools include candlestick patterns, moving averages, relative Strength Indexes (RSI), Bollinger Bands, and more. These analysis tools have mathematical and statistical bases, and understanding them often requires experience and prior knowledge. 

Leverage Options

Leverage options allow traders to acquire bigger trading positions but with a smaller initial deposit, referred to as margins. Platforms that offer margins offer the traders the rest of the capital and share the profits in the same ratio. For example, if a trading platform offers trading leverage of 10:1, a trader can open and hold a position of $10,000 but with only $1000 from his own capital. Not all trading platforms offer leverage options, so traders must choose a platform carefully if they wish to use this feature. 

Order Types

There are several types of trading orders that traders can place. These orders are very handy when implementing risk management strategies and ensuring that the trades are executed effectively. These are simple market orders, limit orders, stop-loss orders, take-profit orders, and trailing stop orders. So before a trader settles on a trading platform, they must confirm that the platform allows the traders to make such order types. 

These are just a few key features that each trader must look for when deciding on an oil trading platform. In addition, keep in mind that you will be giving your personal information to the platform, so make sure it is secure. The platform offers various security measures for traders and their accounts. 

Types of Oil Contracts for Trading

There are quite a few ways that a trade can conduct trading of oil and its derivatives, and here we look at them in detail:

Crude Futures

A crude futures contract is a legally binding buying order between a buyer and a seller, which states that the buyer will buy the determined crude oil units at the determined date in the future. A futures contract is an interesting and highly speculative trading strategy. It can trade any commodity, allowing traders to diversify their portfolios. 

Spot Contracts

Spot contracts involve buying and selling crude oil and its derivatives at the current market price. This type of trade involves the actual physical buying and selling of oil. This is why the execution and consequent settlement of the order take around two days, depending on the location of the buyer and the seller. 

CFDs

CFDs or contracts for difference is a type of speculative trading where the trader makes a profit based on speculating the price movements of an asset without actually owning the asset. This type of trading is famous as it does not involve an asset’s physical ownership and selling. 

Advantages of Trading Oil with CFDs

There are quite a few advantages of trading oil with CFDs, and here we explain them in detail:

Flexibility

CFD trading in oil offers traders flexibility and removes the restriction of physically owning the asset, which is oil in barrels. Traders do not need to source oil from companies, arrange delivery, find a storage place, find a seller, and then find a delivery method after selling. Thus, CFDs offer oil trading without hassle. 

Accessibility

Not everyone can access physical oil trading because of various constraints like location and storage, so CFD trading of oil offers traders accessibility within the oil trading world. 

Leverage

CFD trading allows traders to hold large positions with small capital, which gives them greater confidence in their abilities and offers a shorter learning curve. 

Diversification of Portfolio

The biggest advantage of CFD trading is the diversification of portfolios, which allows traders to access a wider range of asset classes that might not be within their reach otherwise. 

These are just a few of the advantages of trading oil with CFDs. But like most things, there are also a few risks involved with this type of trading that we look at in the next part of the article. 

Risks in Oil Trading

Each type of trade comes with its own risks, and here we look at the risks involved with oil trading:

Volatility

The biggest risk in oil trading is volatility. Many factors affect oil prices, making it highly prone to volatility. 

Leverage-related Losses 

Leverage allows the trader to hold larger positions with small capital but also exposes the trader to a higher risk ratio. 

Market Dynamics

The oil market can be highly dynamic within a short period of time. If not monitored closely, traders holding short-term positions can be at a high risk of incurring losses. 

This is why we suggest that any trader interested in trading oil should first get as much experience as possible via self-study, analysing historical data, and practising on demo accounts. 

Popular Tools for Oil Trading

There are several popular tools for oil trading, and here we look at them:

Technical Analysis Charts

These charts visualise price movements and help traders make variable decisions in seconds. These charts relay real-time price changes, so a trader monitoring them can quickly adjust the trades. 

Fundamental Data Feeds

These data feeds provide real-time world news and historical data analytics that can be very helpful to traders. They offer information on all the latest news on the factors that can affect the price of an asset and are, therefore, very handy to keep on the screen. 

Risk Management Features

These features help you in effectively managing your risk. They may include stop-loss orders and take profit orders. These tools can help you minimise risk and potentially exit a trade when the conditions become undesirable. These are very important as oil trading can be very dynamic in nature. 

How to Evaluate a Platform

As explained, the trading platform plays the utmost important role in addition to a trader’s information on the assets, factors affecting them, and market trends. There are quite a number of platforms in the market today, which can be overwhelming. However, there are some tricks that you can use to effectively evaluate a platform and make a decision for yourself. 

Usability

The most important thing you need to do to evaluate a trading platform is its usability. Use the platform and assess how user-friendly it is. How easy is it to navigate the site? Are its features easy to understand and assess, or are they hard to get to and even harder to use? Answering these questions will help you understand the platform’s usability and help you choose or reject a platform. 

Fees

Most platforms charge fees to use the platform, conduct trades, and take profits. Depending on the platform, these fees can range from one dollar to more. Some sites also offer monthly subscriptions with promises of offering in-depth insights into the market, subscriber-first information, and personal analytical coaches. There are various ways these trading platforms can charge fees. So, when you choose a platform, ensure you know all the associated fees. 

Educational Resources

Most trading platforms offer educational resources to their traders. Look for the platform’s blog and read through it. Are these education resources useful to you, and if so, how often are they updated or posted? This will help you evaluate the presence and activity of the platform in the trading community.

Security Measures

Evaluate what sort of security measures the platform offers. Does it offer two-factor authentication, and how easy is it to get a hold of other traders’ information? If someone does get that information, what are the platform’s policies on it? These questions will help yu evaluate the platform from a security point of view. 

FAQs About Oil Trading Platforms

What is a crude futures contract? 

A future contract is a legally binding buying order between a buyer and a seller, which states that the buyer will buy the determined number or units of an asset at the determined price on the determined date in the future. In the case of the crude futures contract, the buyer will buy crude oil. A futures contract is an interesting and highly speculative trading strategy. 

How do oil trading platforms facilitate speculative trading? 

Oil trading platforms facilitate speculative trading via CFD trading. Contract for the difference of CFD trading is a type of trading where a trader can profit from assets by speculating on their price movements without actually owning the asset. This type of trading comes in handy when trading commodities like oil, coffee, or agricultural products because it removes the need to physically buy and store them. Thus, speculative oil trading via CFDs is an attractive pursuit for traders.

What risks should traders be aware of?

Traders should be aware of the highly dynamic nature of the oil market and the factors that affect it. As oil is one of the most heavily traded assets in the world and is found in a huge and tradeable amount in a few countries, world politics and consequent tensions have a big effect on its price and market. Traders should always be updated with world news, industrial news from the oil conglomerates, and market sentiment. This will help them make good decisions in regard to their oil trades. 

An oil trading platform is an online platform where traders place orders to buy or sell oil. Traders begin by making an account and entering their details. Their accounts are then verified through email or identity verification. Next, traders choose the asset class that they want to trade, which in this case is oil. They place their orders, add tinkering like stop-loss orders, take profit orders, and hit execute. Through these platforms, they can place their trades, monitor them, build a trading portfolio, and visualise the price movements in real time.

Traders can trade oil commodities through CFD trading, where they can specialise in precise differences without actually owning the commodity. This type of trading is very desirable among traders looking to diversify their portfolio and get access to the oil trading market. There are many different online oil trading platforms that the traders can choose to trade oil but the decision of choosing must be made with caution and due diligence.